1991 (8) TMI 323 - HC - VAT and Sales Tax

Issues Involved:

1. Entitlement to eligibility certificate for sales tax exemption.
2. Application of the doctrine of promissory estoppel.
3. Authority of the State Government to amend the Sales Tax Incentive Scheme, 1987.
4. Legality of the notification dated September 10, 1987.

Detailed Analysis:

1. Entitlement to Eligibility Certificate for Sales Tax Exemption:

The petitioner, a public limited company, sought a declaration that it was entitled to a sales tax exemption limit of Rs. 4 crores under the Sales Tax Incentive Scheme for Industries, 1987. The Scheme was promulgated to promote industrial growth in Rajasthan, particularly in backward areas. The petitioner argued that it was covered by the 1985 dispensation under the Scheme, which came into force retrospectively from March 5, 1987. The petitioner had been granted eligibility certificates for exemption from April 16, 1988, to April 15, 1991, but the State Government later reduced the exemption limit to Rs. 1 crore via a notification dated August 6, 1988. The petitioner contended that this reduction was arbitrary and violated Article 14 of the Constitution.

2. Application of the Doctrine of Promissory Estoppel:

The petitioner argued that the State Government was estopped from reducing the exemption limit based on the doctrine of promissory estoppel. The petitioner claimed to have acted on the clear assurance of a Rs. 4 crore exemption limit, investing significant sums in expansion and diversification. The court referenced the case of Modi Alkalies Chemicals Ltd. v. State of Rajasthan and Motilal Padampat Sugar Mill Co. Ltd. v. State of Uttar Pradesh, where it was established that promissory estoppel is an equitable doctrine. The court concluded that the doctrine was applicable as the petitioner had acted on the promise made by the State Government.

3. Authority of the State Government to Amend the Sales Tax Incentive Scheme, 1987:

The State Government argued that it had the authority to amend the Scheme under clauses 10 and 11, which stated that the Scheme was a concession and could be reviewed or amended at any time. The court noted that clause 10 specified the Scheme as a concession and clause 11 allowed for amendments. The court held that the State Government had the right to amend the Scheme, including reducing the exemption limit, as provided in the Scheme itself. Therefore, the doctrine of promissory estoppel did not apply in this context.

4. Legality of the Notification Dated September 10, 1987:

The petitioner challenged the legality of the notification dated September 10, 1987, which amended the Scheme with retrospective effect from March 5, 1987. The court found merit in the petitioner's contention that the State Government did not have the authority to withdraw or reduce exemptions retrospectively under section 4(2) of the Rajasthan Sales Tax Act, 1954, and section 8(5) of the Central Sales Tax Act, 1956. The court cited Vijay Dal Mill v. State of Madhya Pradesh and Mohd. Swallehin v. Lt. Governor, Delhi, concluding that retrospective amendments detrimental to affected parties were not permissible. Consequently, the court struck down clause 6 of the notification dated September 10, 1987, which made the amendment effective retrospectively.

Conclusion:

The writ petition was partly allowed. The court struck down clause 6 of the notification dated September 10, 1987, preventing its retrospective application. The petitioner was advised to file a separate application for benefits based on expansion/diversification, which the respondents would consider on merits. The court upheld the State Government's authority to amend the Scheme but found the retrospective application of the notification illegal.

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